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Click here for a FREE online credit evaluation! The Truth in Lending
Act
Sec. 1601. - Congressional findings and declaration of purpose
(a) Informed use of credit
The Congress finds that economic stabilization would be enhanced and the
competition among the various financial institutions and other firms
engaged in the extension of consumer credit would be strengthened by the
informed use of credit. The informed use of credit results from an
awareness of the cost thereof by consumers. It is the purpose of this
subchapter to assure a meaningful disclosure of credit terms so that the
consumer will be able to compare more readily the various credit terms
available to him and avoid the uninformed use of credit, and to protect
the consumer against inaccurate and unfair credit billing and credit card
practices.
(b) Terms of personal property leases
The Congress also finds that there has been a recent trend toward leasing
automobiles and other durable goods for consumer use as an alternative to
installment credit sales and that these leases have been offered without
adequate cost disclosures. It is the purpose of this subchapter to assure
a meaningful disclosure of the terms of leases of personal property for
personal, family, or household purposes so as to enable the lessee to
compare more readily the various lease terms available to him, limit
balloon payments in consumer leasing, enable comparison of lease terms
with credit terms where appropriate, and to assure meaningful and accurate
disclosures of lease terms in advertisements
Sec. 1602. - Definitions and rules of construction
(a)
The definitions and rules of construction set forth in this section are
applicable for the purposes of this subchapter.
(b)
The term ''Board'' refers to the Board of Governors of the Federal Reserve
System.
(c)
The term ''organization'' means a corporation, government or governmental
subdivision or agency, trust, estate, partnership, cooperative, or
association.
(d)
The term ''person'' means a natural person or an organization.
(e)
The term ''credit'' means the right granted by a creditor to a debtor to
defer payment of debt or to incur debt and defer its payment.
(f)
The term ''creditor'' refers only to a person who both
(1)
regularly extends, whether in connection with loans, sales of property or
services, or otherwise, consumer credit which is payable by agreement in
more than four installments or for which the payment of a finance charge
is or may be required, and
(2)
is the person to whom the debt arising from the consumer credit
transaction is initially payable on the face of the evidence of
indebtedness or, if there is no such evidence of indebtedness, by
agreement. Notwithstanding the preceding sentence, in the case of an
open-end credit plan involving a credit card, the card issuer and any
person who honors the credit card and offers a discount which is a finance
charge are creditors. For the purpose of the requirements imposed under
part D of this subchapter and sections 1637(a)(5), 1637(a)(6), 1637(a)(7),
1637(b)(1), 1637(b)(2), 1637(b)(3), 1637(b)(8), and 1637(b)(10) of this
title, the term ''creditor'' shall also include card issuers whether or
not the amount due is payable by agreement in more than four installments
or the payment of a finance charge is or may be required, and the Board
shall, by regulation, apply these requirements to such card issuers, to
the extent appropriate, even though the requirements are by their terms
applicable only to creditors offering open-end credit plans. Any person
who originates 2 or more mortgages referred to in subsection (aa) of this
section in any 12-month period or any person who originates 1 or more such
mortgages through a mortgage broker shall be considered to be a creditor
for purposes of this subchapter.
(g)
The term ''credit sale'' refers to any sale in which the seller is a
creditor. The term includes any contract in the form of a bailment or
lease if the bailee or lessee contracts to pay as compensation for use a
sum substantially equivalent to or in excess of the aggregate value of the
property and services involved and it is agreed that the bailee or lessee
will become, or for no other or a nominal consideration has the option to
become, the owner of the property upon full compliance with his
obligations under the contract.
(h)
The adjective ''consumer'', used with reference to a credit transaction,
characterizes the transaction as one in which the party to whom credit is
offered or extended is a natural person, and the money, property, or
services which are the subject of the transaction are primarily for
personal, family, or household purposes.
(i)
The term ''open end credit plan'' means a plan under which the creditor
reasonably contemplates repeated transactions, which prescribes the terms
of such transactions, and which provides for a finance charge which may be
computed from time to time on the outstanding unpaid balance. A credit
plan which is an open end credit plan within the meaning of the preceding
sentence is an open end credit plan even if credit information is verified
from time to time.
(j)
The term ''adequate notice,'' as used in section 1643 of this title, means
a printed notice to a cardholder which sets forth the pertinent facts
clearly and conspicuously so that a person against whom it is to operate
could reasonably be expected to have noticed it and understood its
meaning. Such notice may be given to a cardholder by printing the notice
on any credit card, or on each periodic statement of account, issued to
the cardholder, or by any other means reasonably assuring the receipt
thereof by the cardholder.
(k)
The term ''credit card'' means any card, plate, coupon book or other
credit device existing for the purpose of obtaining money, property,
labor, or services on credit.
(l)
The term ''accepted credit card'' means any credit card which the
cardholder has requested and received or has signed or has used, or
authorized another to use, for the purpose of obtaining money, property,
labor, or services on credit.
(m)
The term ''cardholder'' means any person to whom a credit card is issued
or any person who has agreed with the card issuer to pay obligations
arising from the issuance of a credit card to another person.
(n)
The term ''card issuer'' means any person who issues a credit card, or the
agent of such person with respect to such card.
(o)
The term ''unauthorized use,'' as used in section 1643 of this title,
means a use of a credit card by a person other than the cardholder who
does not have actual, implied, or apparent authority for such use and from
which the cardholder receives no benefit.
(p)
The term ''discount'' as used in section 1666f of this title means a
reduction made from the regular price. The term ''discount'' as used in
section 1666f of this title shall not mean a surcharge.
(q)
The term ''surcharge'' as used in this section and section 1666f of this
title means any means of increasing the regular price to a cardholder
which is not imposed upon customers paying by cash, check, or similar
means.''
(r)
The term ''State'' refers to any State, the Commonwealth of Puerto Rico,
the District of Columbia, and any territory or possession of the United
States.
(s)
The term ''agricultural purposes'' includes the production, harvest,
exhibition, marketing, transportation, processing, or manufacture of
agricultural products by a natural person who cultivates, plants,
propagates, or nurtures those agricultural products, including but not
limited to the acquisition of farmland, real property with a farm
residence, and personal property and services used primarily in farming.
(t)
The term ''agricultural products'' includes agricultural, horticultural,
viticultural, and dairy products, livestock, wildlife, poultry, bees,
forest products, fish and shellfish, and any products thereof, including
processed and manufactured products, and any and all products raised or
produced on farms and any processed or manufactured products thereof.
(u)
The term ''material disclosures'' means the disclosure, as required by
this subchapter, of the annual percentage rate, the method of determining
the finance charge and the balance upon which a finance charge will be
imposed, the amount of the finance charge, the amount to be financed, the
total of payments, the number and amount of payments, the due dates or
periods of payments scheduled to repay the indebtedness, and the
disclosures required by section 1639(a) of this title.
(v)
The term ''dwelling'' means a residential structure or mobile home which
contains one to four family housing units, or individual units of
condominiums or cooperatives.
(w)
The term ''residential mortgage transaction'' means a transaction in which
a mortgage, deed of trust, purchase money security interest arising under
an installment sales contract, or equivalent consensual security interest
is created or retained against the consumer's dwelling to finance the
acquisition or initial construction of such dwelling.
(x)
As used in this section and section 1666f of this title, the term
''regular price'' means the tag or posted price charged for the property
or service if a single price is tagged or posted, or the price charged for
the property or service when payment is made by use of an open-end credit
plan or a credit card if either
(1)
no price is tagged or posted, or
(2)
two prices are tagged or posted, one of which is charged when payment is
made by use of an open-end credit plan or a credit card and the other when
payment is made by use of cash, check, or similar means. For purposes of
this definition, payment by check, draft, or other negotiable instrument
which may result in the debiting of an open-end credit plan or a credit
cardholder's open-end account shall not be considered payment made by use
of the plan or the account.
(y)
Any reference to any requirement imposed under this subchapter or any
provision thereof includes reference to the regulations of the Board under
this subchapter or the provision thereof in question.
(z)
The disclosure of an amount or percentage which is greater than the amount
or percentage required to be disclosed under this subchapter does not in
itself constitute a violation of this subchapter.
(aa)
(1)
A mortgage referred to in this subsection means a consumer credit
transaction that is secured by the consumer's principal dwelling, other
than a residential mortgage transaction, a reverse mortgage transaction,
or a transaction under an open end credit plan, if -
(A)
the annual percentage rate at consummation of the transaction will exceed
by more than 10 percentage points the yield on Treasury securities having
comparable periods of maturity on the fifteenth day of the month
immediately preceding the month in which the application for the extension
of credit is received by the creditor; or
(B)
the total points and fees payable by the consumer at or before closing
will exceed the greater of -
(i)
8 percent of the total loan amount; or
(ii)
$400.
(2)
(A)
After the 2-year period beginning on the effective date of the regulations
promulgated under section 155 of the Riegle Community Development and
Regulatory Improvement Act of 1994, and no more frequently than biennially
after the first increase or decrease under this subparagraph, the Board
may by regulation increase or decrease the number of percentage points
specified in paragraph (1)(A), if the Board determines that the increase
or decrease is -
(i)
consistent with the consumer protections against abusive lending provided
by the amendments made by subtitle B of title I of the Riegle Community
Development and Regulatory Improvement Act of 1994; and
(ii)
warranted by the need for credit.
(B)
An increase or decrease under subparagraph (A) may not result in the
number of percentage points referred to in subparagraph (A) being -
(i)
less that 8 percentage points; or
(ii)
greater than 12 percentage points.
(C)
In determining whether to increase or decrease the number of percentage
points referred to in subparagraph (A), the Board shall consult with
representatives of consumers, including low-income consumers, and lenders.
(3)
The amount specified in paragraph (1)(B)(ii) shall be adjusted annually on
January 1 by the annual percentage change in the Consumer Price Index, as
reported on June 1 of the year preceding such adjustment.
(4)
For purposes of paragraph (1)(B), points and fees shall include -
(A)
all items included in the finance charge, except interest or the
time-price differential;
(B)
all compensation paid to mortgage brokers;
(C)
each of the charges listed in section 1605(e) of this title (except an
escrow for future payment of taxes), unless -
(i)
the charge is reasonable;
(ii)
the creditor receives no direct or indirect compensation; and
(iii)
the charge is paid to a third party unaffiliated with the creditor; and
(D)
such other charges as the Board determines to be appropriate.
(5)
This subsection shall not be construed to limit the rate of interest or
the finance charge that a person may charge a consumer for any extension
of credit.
(bb)
The term ''reverse mortgage transaction'' means a nonrecourse transaction
in which a mortgage, deed of trust, or equivalent consensual security
interest is created against the consumer's principal dwelling -
(1)
securing one or more advances; and
(2)
with respect to which the payment of any principal, interest, and shared
appreciation or equity is due and payable (other than in the case of
default) only after -
(A)
the transfer of the dwelling;
(B)
the consumer ceases to occupy the dwelling as a principal dwelling; or
(C)
the death of the consumer
Sec. 1603. - Exempted transactions
This subchapter does not apply to the following:
(1)
Credit transactions involving extensions of credit primarily for business,
commercial, or agricultural purposes, or to government or governmental
agencies or instrumentalities, or to organizations.
(2)
Transactions in securities or commodities accounts by a broker-dealer
registered with the Securities and Exchange Commission.
(3)
Credit transactions, other than those in which a security interest is or
will be acquired in real property, or in personal property used or
expected to be used as the principal dwelling of the consumer, in which
the total amount financed exceeds $25,000.
(4)
Transactions under public utility tariffs, if the Board determines that a
State regulatory body regulates the charges for the public utility
services involved, the charges for delayed payment, and any discount
allowed for early payment.
(5)
Transactions for which the Board, by rule, determines that coverage under
this subchapter is not necessary to carry out the purposes of this
subchapter.
(6) Repealed. Pub.
L. 96-221, title VI, Sec. 603(c)(3), Mar. 31, 1980, 94 Stat. 169.
(7)
Loans made, insured, or guaranteed pursuant to a program authorized by
title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq., 42
U.S.C. 2751 et seq.)
Sec. 1604. - Disclosure guidelines
(a) Promulgation, contents, etc., of regulations
The Board shall prescribe regulations to carry out the purposes of this
subchapter. Except in the case of a mortgage referred to in section
1602(aa) of this title, these regulations may contain such
classifications, differentiations, or other provisions, and may provide
for such adjustments and exceptions for any class of transactions, as in
the judgment of the Board are necessary or proper to effectuate the
purposes of this subchapter, to prevent circumvention or evasion thereof,
or to facilitate compliance therewith.
(b) Model disclosure forms and clauses; publication, criteria, compliance,
etc.
The Board shall publish model disclosure forms and clauses for common
transactions to facilitate compliance with the disclosure requirements of
this subchapter and to aid the borrower or lessee in understanding the
transaction by utilizing readily understandable language to simplify the
technical nature of the disclosures. In devising such forms, the Board
shall consider the use by creditors or lessors of data processing or
similar automated equipment. Nothing in this subchapter may be construed
to require a creditor or lessor to use any such model form or clause
prescribed by the Board under this section. A creditor or lessor shall be
deemed to be in compliance with the disclosure provisions of this
subchapter with respect to other than numerical disclosures if the
creditor or lessor
(1)
uses any appropriate model form or clause as published by the Board, or
(2)
uses any such model form or clause and changes it by
(A)
deleting any information which is not required by this subchapter, or
(B)
rearranging the format, if in making such deletion or rearranging the
format, the creditor or lessor does not affect the substance, clarity, or
meaningful sequence of the disclosure.
(c) Procedures applicable for adoption of model forms and clauses
Model disclosure forms and clauses shall be adopted by the Board after
notice duly given in the Federal Register and an opportunity for public
comment in accordance with section 553 of title 5.
(d) Effective dates of regulations containing new disclosure requirements
Any regulation of the Board, or any amendment or interpretation thereof,
requiring any disclosure which differs from the disclosures previously
required by this part, part D, or part E of this subchapter or by any
regulation of the Board promulgated thereunder shall have an effective
date of that October 1 which follows by at least six months the date of
promulgation, except that the Board may at its discretion take interim
action by regulation, amendment, or interpretation to lengthen the period
of time permitted for creditors or lessors to adjust their forms to
accommodate new requirements or shorten the length of time for creditors
or lessors to make such adjustments when it makes a specific finding that
such action is necessary to comply with the findings of a court or to
prevent unfair or deceptive disclosure practices. Notwithstanding the
previous sentence, any creditor or lessor may comply with any such newly
promulgated disclosure requirements prior to the effective date of the
requirements.
(f)
[1] Exemption authority
(1) In general
The Board may exempt, by regulation, from all or part of this subchapter
any class of transactions, other than transactions involving any mortgage
described in section 1602(aa) of this title, for which, in the
determination of the Board, coverage under all or part of this subchapter
does not provide a meaningful benefit to consumers in the form of useful
information or protection.
(2) Factors for consideration
In determining which classes of transactions to exempt in whole or in part
under paragraph (1), the Board shall consider the following factors and
publish its rationale at the time a proposed exemption is published for
comment:
(A)
The amount of the loan and whether the disclosures, right of rescission,
and other provisions provide a benefit to the consumers who are parties to
such transactions, as determined by the Board.
(B)
The extent to which the requirements of this subchapter complicate,
hinder, or make more expensive the credit process for the class of
transactions.
(C)
The status of the borrower, including -
(i)
any related financial arrangements of the borrower, as determined by the
Board;
(ii)
the financial sophistication of the borrower relative to the type of
transaction; and
(iii)
the importance to the borrower of the credit, related supporting property,
and coverage under this subchapter, as determined by the Board;
(D)
whether the loan is secured by the principal residence of the consumer;
and
(E)
whether the goal of consumer protection would be undermined by such an
exemption.
(g) Waiver for certain borrowers
(1) In general
The Board, by regulation, may exempt from the requirements of this
subchapter certain credit transactions if -
(A)
the transaction involves a consumer -
(i)
with an annual earned income of more than $200,000; or
(ii)
having net assets in excess of $1,000,000 at the time of the transaction;
and
(B)
a waiver that is handwritten, signed, and dated by the consumer is first
obtained from the consumer.
(2) Adjustments by the Board
The Board, at its discretion, may adjust the annual earned income and net
asset requirements of paragraph (1) for inflation
Sec. 1605. - Determination of finance charge
(a) ''Finance charge'' defined
Except as otherwise provided in this section, the amount of the finance
charge in connection with any consumer credit transaction shall be
determined as the sum of all charges, payable directly or indirectly by
the person to whom the credit is extended, and imposed directly or
indirectly by the creditor as an incident to the extension of credit. The
finance charge does not include charges of a type payable in a comparable
cash transaction. The finance charge shall not include fees and amounts
imposed by third party closing agents (including settlement agents,
attorneys, and escrow and title companies) if the creditor does not
require the imposition of the charges or the services provided and does
not retain the charges. Examples of charges which are included in the
finance charge include any of the following types of charges which are
applicable:
(1)
Interest, time price differential, and any amount payable under a point,
discount, or other system or additional charges.
(2)
Service or carrying charge.
(3)
Loan fee, finder's fee, or similar charge.
(4)
Fee for an investigation or credit report.
(5)
Premium or other charge for any guarantee or insurance protecting the
creditor against the obligor's default or other credit loss.
(6)
Borrower-paid mortgage broker fees, including fees paid directly to the
broker or the lender (for delivery to the broker) whether such fees are
paid in cash or financed.
(b) Life, accident, or health insurance premiums included in finance
charge
Charges or premiums for credit life, accident, or health insurance written
in connection with any consumer credit transaction shall be included in
the finance charges unless
(1)
the coverage of the debtor by the insurance is not a factor in the
approval by the creditor of the extension of credit, and this fact is
clearly disclosed in writing to the person applying for or obtaining the
extension of credit; and
(2)
in order to obtain the insurance in connection with the extension of
credit, the person to whom the credit is extended must give specific
affirmative written indication of his desire to do so after written
disclosure to him of the cost thereof.
(c) Property damage and liability insurance premiums included in finance
charge
Charges or premiums for insurance, written in connection with any consumer
credit transaction, against loss of or damage to property or against
liability arising out of the ownership or use of property, shall be
included in the finance charge unless a clear and specific statement in
writing is furnished by the creditor to the person to whom the credit is
extended, setting forth the cost of the insurance if obtained from or
through the creditor, and stating that the person to whom the credit is
extended may choose the person through which the insurance is to be
obtained.
(d) Items exempted from computation of finance charge in all credit
transactions
If any of the following items is itemized and disclosed in accordance with
the regulations of the Board in connection with any transaction, then the
creditor need not include that item in the computation of the finance
charge with respect to that transaction:
(1)
Fees and charges prescribed by law which actually are or will be paid to
public officials for determining the existence of or for perfecting or
releasing or satisfying any security related to the credit transaction.
(2)
The premium payable for any insurance in lieu of perfecting any security
interest otherwise required by the creditor in connection with the
transaction, if the premium does not exceed the fees and charges described
in paragraph (1) which would otherwise be payable.
(3)
Any tax levied on security instruments or on documents evidencing
indebtedness if the payment of such taxes is a precondition for recording
the instrument securing the evidence of indebtedness.
(e) Items exempted from computation of finance charge in extensions of
credit secured by an interest in real property
The following items, when charged in connection with any extension of
credit secured by an interest in real property, shall not be included in
the computation of the finance charge with respect to that transaction:
(1)
Fees or premiums for title examination, title insurance, or similar
purposes.
(2)
Fees for preparation of loan-related documents.
(3)
Escrows for future payments of taxes and insurance.
(4)
Fees for notarizing deeds and other documents.
(5)
Appraisal fees, including fees related to any pest infestation or flood
hazard inspections conducted prior to closing.
(6)
Credit reports.
(f) Tolerances for accuracy
In connection with credit transactions not under an open end credit plan
that are secured by real property or a dwelling, the disclosure of the
finance charge and other disclosures affected by any finance charge -
(1)
shall be treated as being accurate for purposes of this subchapter if the
amount disclosed as the finance charge -
(A)
does not vary from the actual finance charge by more than $100; or
(B)
is greater than the amount required to be disclosed under this subchapter;
and
(2)
shall be treated as being accurate for purposes of section 1635 of this
title if -
(A)
except as provided in subparagraph (B), the amount disclosed as the
finance charge does not vary from the actual finance charge by more than
an amount equal to one-half of one percent of the total amount of credit
extended; or
(B)
in the case of a transaction, other than a mortgage referred to in section
1602(aa) of this title, which -
(i)
is a refinancing of the principal balance then due and any accrued and
unpaid finance charges of a residential mortgage transaction as defined in
section 1602(w) of this title, or is any subsequent refinancing of such a
transaction; and
(ii)
does not provide any new consolidation or new advance;
if the amount disclosed as the finance charge does not vary from the
actual finance charge by more than an amount equal to one percent of the
total amount of credit extended
Sec. 1606. - Determination of annual percentage rate
(a) ''Annual percentage rate'' defined
The annual percentage rate applicable to any extension of consumer credit
shall be determined, in accordance with the regulations of the Board,
(1)
in the case of any extension of credit other than under an open end credit
plan, as
(A)
that nominal annual percentage rate which will yield a sum equal to the
amount of the finance charge when it is applied to the unpaid balances of
the amount financed, calculated according to the actuarial method of
allocating payments made on a debt between the amount financed and the
amount of the finance charge, pursuant to which a payment is applied first
to the accumulated finance charge and the balance is applied to the unpaid
amount financed; or
(B)
the rate determined by any method prescribed by the Board as a method
which materially simplifies computation while retaining reasonable
accuracy as compared with the rate determined under subparagraph (A).
(2)
in the case of any extension of credit under an open end credit plan, as
the quotient (expressed as a percentage) of the total finance charge for
the period to which it relates divided by the amount upon which the
finance charge for that period is based, multiplied by the number of such
periods in a year.
(b) Computation of rate of finance charges for balances within a specified
range
Where a creditor imposes the same finance charge for balances within a
specified range, the annual percentage rate shall be computed on the
median balance within the range, except that if the Board determines that
a rate so computed would not be meaningful, or would be materially
misleading, the annual percentage rate shall be computed on such other
basis as the Board may be regulation require.
(c) Allowable tolerances for purposes of compliance with disclosure
requirements
The disclosure of an annual percentage rate is accurate for the purpose of
this subchapter if the rate disclosed is within a tolerance not greater
than one-eighth of 1 per centum more or less than the actual rate or
rounded to the nearest one-fourth of 1 per centum. The Board may allow a
greater tolerance to simplify compliance where irregular payments are
involved.
(d) Use of rate tables or charts having allowable variance from determined
rates
The Board may authorize the use of rate tables or charts which may provide
for the disclosure of annual percentage rates which vary from the rate
determined in accordance with subsection (a)(1)(A) of this section by not
more than such tolerances as the Board may allow. The Board may not allow
a tolerance greater than 8 per centum of that rate except to simplify
compliance where irregular payments are involved.
(e) Authorization of tolerances in determining annual percentage rates
In the case of creditors determining the annual percentage rate in a
manner other than as described in subsection (d) of this section, the
Board may authorize other reasonable tolerances
Sec. 1607. - Administrative enforcement
(a) Enforcing agencies
Compliance with the requirements imposed under this subchapter shall be
enforced under
(1)
section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818), in the
case of -
(A)
national banks, and Federal branches and Federal agencies of foreign
banks, by the Office of the Comptroller of the Currency;
(B)
member banks of the Federal Reserve System (other than national banks),
branches and agencies of foreign banks (other than Federal branches,
Federal agencies, and insured State branches of foreign banks), commercial
lending companies owned or controlled by foreign banks, and organizations
operating under section 25 or 25(a) [1] of the Federal Reserve Act (12
U.S.C. 601 et seq., 611 et seq.), by the Board; and
(C)
banks insured by the Federal Deposit Insurance Corporation (other than
members of the Federal Reserve System) and insured State branches of
foreign banks, by the Board of Directors of the Federal Deposit Insurance
Corporation;
(2)
section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818), by the
Director of the Office of Thrift Supervision, in the case of a savings
association the deposits of which are insured by the Federal Deposit
Insurance Corporation.
(3)
the Federal Credit Union Act (12 U.S.C. 1751 et seq.), by the National
Credit Union Administration Board with respect to any Federal credit
union.
(4)
part A of subtitle VII of title 49, by the Secretary of Transportation
with respect to any air carrier or foreign air carrier subject to that
part.
(5)
the Packers and Stockyards Act, 1921 (7 U.S.C. 181 et seq.) (except as
provided in section 406 of that Act (7 U.S.C. 226, 227)), by the Secretary
of Agriculture with respect to any activities subject to that Act.
(6)
the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) by the Farm Credit
Administration with respect to any Federal land bank, Federal land bank
association, Federal intermediate credit bank, or production credit
association.
The terms used in paragraph (1) that are not defined in this subchapter or
otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12
U.S.C. 1813(s)) shall have the meaning given to them in section 1(b) of
the International Banking Act of 1978 (12 U.S.C. 3101).
(b) Violations of this subchapter deemed violations of pre-existing
statutory requirements; additional agency powers
For the purpose of the exercise by any agency referred to in subsection
(a) of this section of its powers under any Act referred to in that
subsection, a violation of any requirement imposed under this subchapter
shall be deemed to be a violation of a requirement imposed under that Act.
In addition to its powers under any provision of law specifically referred
to in subsection (a) of this section, each of the agencies referred to in
that subsection may exercise, for the purpose of enforcing compliance with
any requirement imposed under this subchapter, any other authority
conferred on it by law.
(c) Federal Trade Commission as overall enforcing agency
Except to the extent that enforcement of the requirements imposed under
this subchapter is specifically committed to some other Government agency
under subsection (a) of this section, the Federal Trade Commission shall
enforce such requirements. For the purpose of the exercise by the Federal
Trade Commission of its functions and powers under the Federal Trade
Commission Act (15 U.S.C. 41 et seq.), a violation of any requirement
imposed under this subchapter shall be deemed a violation of a requirement
imposed under that Act. All of the functions and powers of the Federal
Trade Commission under the Federal Trade Commission Act are available to
the Commission to enforce compliance by any person with the requirements
imposed under this subchapter, irrespective of whether that person is
engaged in commerce or meets any other jurisdictional tests in the Federal
Trade Commission Act.
(d) Rules and regulations
The authority of the Board to issue regulations under this subchapter does
not impair the authority of any other agency designated in this section to
make rules respecting its own procedures in enforcing compliance with
requirements imposed under this subchapter.
(e) Adjustment of finance charges; procedures applicable, coverage,
criteria, etc.
(1)
In carrying out its enforcement activities under this section, each agency
referred to in subsection (a) or (c) of this section, in cases where an
annual percentage rate or finance charge was inaccurately disclosed, shall
notify the creditor of such disclosure error and is authorized in
accordance with the provisions of this subsection to require the creditor
to make an adjustment to the account of the person to whom credit was
extended, to assure that such person will not be required to pay a finance
charge in excess of the finance charge actually disclosed or the dollar
equivalent of the annual percentage rate actually disclosed, whichever is
lower. For the purposes of this subsection, except where such disclosure
error resulted from a willful violation which was intended to mislead the
person to whom credit was extended, in determining whether a disclosure
error has occurred and in calculating any adjustment,
(A)
each agency shall apply
(i)
with respect to the annual percentage rate, a tolerance of one-quarter of
1 percent more or less than the actual rate, determined without regard to
section 1606(c) of this title, and
(ii)
with respect to the finance charge, a corresponding numerical tolerance as
generated by the tolerance provided under this subsection for the annual
percentage rate; except that
(B)
with respect to transactions consummated after two years following March
31, 1980, each agency shall apply
(i)
for transactions that have a scheduled amortization of ten years or less,
with respect to the annual percentage rate, a tolerance not to exceed
one-quarter of 1 percent more or less than the actual rate, determined
without regard to section 1606(c) of this title, but in no event a
tolerance of less than the tolerances allowed under section 1606(c) of
this title,
(ii)
for transactions that have a scheduled amortization of more than ten
years, with respect to the annual percentage rate, only such tolerances as
are allowed under section 1606(c) of this title, and
(iii)
for all transactions, with respect to the finance charge, a corresponding
numerical tolerance as generated by the tolerances provided under this
subsection for the annual percentage rate.
(2)
Each agency shall require such an adjustment when it determines that such
disclosure error resulted from
(A)
a clear and consistent pattern or practice of violations,
(B)
gross negligence, or
(C)
a willful violation which was intended to mislead the person to whom the
credit was extended. Notwithstanding the preceding sentence, except where
such disclosure error resulted from a willful violation which was intended
to mislead the person to whom credit was extended, an agency need not
require such an adjustment if it determines that such disclosure error -
(A)
resulted from an error involving the disclosure of a fee or charge that
would otherwise be excludable in computing the finance charge, including
but not limited to violations involving the disclosures described in
sections 1605(b), (c) and (d) of this title, in which event the agency may
require such remedial action as it determines to be equitable, except that
for transactions consummated after two years after March 31, 1980, such an
adjustment shall be ordered for violations of section 1605(b) of this
title;
(B)
involved a disclosed amount which was 10 per centum or less of the amount
that should have been disclosed and
(i)
in cases where the error involved a disclosed finance charge, the annual
percentage rate was disclosed correctly, and
(ii)
in cases where the error involved a disclosed annual percentage rate, the
finance charge was disclosed correctly; in which event the agency may
require such adjustment as it determines to be equitable;
(C)
involved a total failure to disclose either the annual percentage rate or
the finance charge, in which event the agency may require such adjustment
as it determines to be equitable; or
(D)
resulted from any other unique circumstance involving clearly technical
and nonsubstantive disclosure violations that do not adversely affect
information provided to the consumer and that have not misled or otherwise
deceived the consumer.
In the case of other such disclosure errors, each agency may require such
an adjustment.
(3)
Notwithstanding paragraph (2), no adjustment shall be ordered -
(A)
if it would have a significantly adverse impact upon the safety or
soundness of the creditor, but in any such case, the agency may -
(i)
require a partial adjustment in an amount which does not have such an
impact; or
(ii)
require the full adjustment, but permit the creditor to make the required
adjustment in partial payments over an extended period of time which the
agency considers to be reasonable, if (in the case of an agency referred
to in paragraph (1), (2), or (3) of subsection (a) of this section), the
agency determines that a partial adjustment or making partial payments
over an extended period is necessary to avoid causing the creditor to
become undercapitalized pursuant to section 38 of the Federal Deposit
Insurance Act (12 U.S.C. 1831o);
(B)
the [2] amount of the adjustment would be less than $1, except that if
more than one year has elapsed since the date of the violation, the agency
may require that such amount be paid into the Treasury of the United
States, or ''if''.
(C)
except where such disclosure error resulted from a willful violation which
was intended to mislead the person to whom credit was extended, in the
case of an open-end credit plan, more than two years after the violation,
or in the case of any other extension of credit, as follows:
(i)
with respect to creditors that are subject to examination by the agencies
referred to in paragraphs (1) through (3) of subsection (a) of this
section, except in connection with violations arising from practices
identified in the current examination and only in connection with
transactions that are consummated after the date of the immediately
preceding examination, except that where practices giving rise to
violations identified in earlier examinations have not been corrected,
adjustments for those violations shall be required in connection with
transactions consummated after the date of examination in which such
practices were first identified;
(ii)
with respect to creditors that are not subject to examination by such
agencies, except in connection with transactions that are consummated
after May 10, 1978; and
(iii)
in no event after the later of
(I)
the expiration of the life of the credit extension, or
(II)
two years after the agreement to extend credit was consummated.
(4)
(A)
Notwithstanding any other provision of this section, an adjustment under
this subsection may be required by an agency referred to in subsection (a)
or (c) of this section only by an order issued in accordance with cease
and desist procedures provided by the provision of law referred to in such
subsections.
(B)
In case of an agency which is not authorized to conduct cease and desist
proceedings, such an order may be issued after an agency hearing on the
record conducted at least thirty but not more than sixty days after notice
of the alleged violation is served on the creditor. Such a hearing shall
be deemed to be a hearing which is subject to the provisions of section
8(h) of the Federal Deposit Insurance Act (12 U.S.C. 1818(h)) and shall be
subject to judicial review as provided therein.
(5)
Except as otherwise specifically provided in this subsection and
notwithstanding any provision of law referred to in subsection (a) or (c)
of this section, no agency referred to in subsection (a) or (c) of this
section may require a creditor to make dollar adjustments for errors in
any requirements under this subchapter, except with regard to the
requirements of section 1666d of this title.
(6)
A creditor shall not be subject to an order to make an adjustment, if
within sixty days after discovering a disclosure error, whether pursuant
to a final written examination report or through the creditor's own
procedures, the creditor notifies the person concerned of the error and
adjusts the account so as to assure that such person will not be required
to pay a finance charge in excess of the finance charge actually disclosed
or the dollar equivalent of the annual percentage rate actually disclosed,
whichever is lower.
(7)
Notwithstanding the second sentence of subsection (e)(1), subsection
(e)(3)(C)(i), and subsection (e)(3)(C)(ii) of this section, each agency
referred to in subsection (a) or (c) of this section shall require an
adjustment for an annual percentage rate disclosure error that exceeds a
tolerance of one quarter of one percent less than the actual rate,
determined without regard to section 1606(c) of this title, with respect
to any transaction consummated between January 1, 1977, and March 31, 1980
Sec. 1608. - Views of other agencies
In the exercise of its functions under this subchapter, the Board may
obtain upon requests the views of any other Federal agency which, in the
judgment of the Board, exercises regulatory or supervisory functions with
respect to any class of creditors subject to this subchapter |
